European Union: ECJ Strengthens Position Of Media Industry In Fight Against Piracy

On April 26, 2017, the European Court of Justice (ECJ) issued a
judgment on the liability of sellers of set-top boxes containing
pre-installed add-ons enabling illegal access to motion pictures as
well as to Pay-TV and SVoD platforms ("loaded Kodi
boxes"). The legal dispute concerning the legality of such
sales has thereby been decided in favor of the media industry. In
consequence, it will be possible to claim injunctive relief and
damages not only from the individual end user but also from
companies selling loaded Kodi boxes. The decision is likely to
prove a valuable tool against some of the emerging forms of
piracy.

I. Facts

In the proceedings against Jack Frederik Wullems, the seller of
loaded Kodi boxes under the name
"filmspeler"' a request for a preliminary
ruling concerning the interpretation of the Copyright Directive was
referred to the ECJ.

Mr. Wullems sold his multimedia player filmspeler, a
typical example of a loaded Kodi box, on his own website as well as
via commercial online platforms. While the Kodi software itself is
legitimate multimedia software to be used with all kinds of set-top
boxes, it can easily be extended by installing illegal add-ons made
available by third parties. The filmspeler media player
consists of a Kodi box with pre-installed software and third party
add-ons that link to websites on which protected works are made
available without the copyright owner's consent. The seller
expressly advertised the media player's feature enabling access
to protected material free of charge with slogans such as:
"Never have to go to the cinema again" and "Want to
watch free films, series, sport without having to pay?"

The main questions presented to the ECJ related to:

(i) the selling of the filmspeler media player being
interpreted as a (copyright infringing) "communication to the
public," and

(ii) such unauthorized streaming of copyright-protected work by
end users not qualifying as "lawful use," regardless of
the streaming's nature as only a "temporary
reproduction."

Both questions were decided in favor of the media
industry.

II. Liability of Sellers (No Hiding Anymore)

Article 3 of the Copyright Directive provides that an act
constituting a "communication to the public" of protected
work requires authorization by the copyright owner. While this was
originally interpreted as involving some form of actual
transmission, the ECJ recently ruled in its "GS Media"
decision that even the posting of a hyperlink can suffice. In that
judgment, a violation of copyright was determined, not only because
the link referred to works illegally placed on the Internet, but
also because the infringer had knowledge of the copyright
infringement. The ECJ ruled that there was a "rebuttable
presumption" of knowledge if such a hyperlink was placed in a
commercial context. Following this, and in consideration of the
ECJ's broad definition of the term "communication to the
public" in support of authors' rights, the court found
that the sale of the filmspeler media player also
represented an infringing act of "communication to the
public":

Firstly, the seller was intentionally providing access to
protected works his customers would otherwise not have accessed
– thereby going beyond the mere "physical provision of
facilities."

Secondly, the number of existing and potential customers was
also sufficient for the communication to be considered directed
towards the "public."

Thirdly, the marketing of the media player made it common
knowledge that the seller knew about the add-ons linking to
unauthorized content, thereby supporting the applicability of the
GSMedia valuations to the
filmspeler case.

III. Liability of End Users (A Grey Area Turning Black)

The second question concerned the legality of the act of
"temporary reproduction" – an act automatically
carried out by end users during the streaming of
copyright-protected works. Prior to the decision, accessing
protected content via online streaming services (as opposed to
downloading and uploading of the content) had been considered a
grey area from a legal point of view. However, in the
filmspeler decision, the ECJ outlined that an act of
reproduction may only be exempted from authorization requirements
if it cumulatively satisfies five conditions pursuant to
Article 5 of the Copyright Directive, i.e., where the act is
temporary; where it is transient or incidental; where it is an
integral and essential part of a technological process; where the
sole purpose of that process is to enable a transmission in a
network between third parties (by an intermediary, as was not the
case) or the lawful use of a work or protected
subject matter; and where that act does not have any
independent economic significance.

The filmspeler judgment clarifies that even the mere
act of temporary reproduction on a multimedia player violates
copyright law because it does not satisfy all of the conditions
mentioned above.

Considering the open promotion of the multimedia player's
illegal features, the ECJ held that the purchaser of such a player
deliberately and in full knowledge accesses an unauthorized offer
of protected works.

Further, these acts of reproduction conflict with the normal
exploitation of works and prejudice the legitimate interests of the
right holders. In other words: if end users can access content
free-of-charge, they are less likely to pay for it and copyright
holders are more likely to receive less remuneration.

In the context of openly promoted fully loaded Kodi boxes,
temporary reproductions are therefore neither designed as
representing a lawful use nor can their economic consequence be
denied. Thus they constitute a violation of copyright
law.

IV. Consequences

The judgment will have a significant effect on a business model
that had sky-rocketed in past years, with loaded Kodi boxes being
one of the top Christmas presents in the UK in 2016. For the media
industry, the decision strengthens the right holders in the fight
against piracy. Right holders can now take action against the
seller of fully loaded Kodi boxes as well as against the individual
end user.

However, some questions are still left open, such as whether
aggressive marketing of unauthorized access is mandatory for the
applicability of claims. With regard to copyright infringements of
end users, it will remain to be seen in what way the
"knowledge" of the end user concerning the illegality of
the streamed content will be determined if the streaming has not
been openly advertised as being unauthorized. In addition, not only
does it remain difficult for right holders to gain access to the IP
addresses of end users to evidence violations, the sellers of
loaded Kodi boxes are also often situated in foreign countries, for
example, China, making it close to impossible to actually execute
claims against them.

Because of the generality of this update, the information
provided herein may not be applicable in all situations and should
not be acted upon without specific legal advice based on particular
situations.

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